Concerned with the acceleration of inflation, the Central decided to tighten monetary policy until May


1. Continue with the exceedance of the monetary base (WB) target. "This excess of compliance was announced in the COPOM statement last month, predicting the seasonal decline in transactional demand for cash after January's high. Monetary expansion associated with BCRA's foreign currency purchases (US $ 418 million) added US $ 12,600 million for the February Monetary Base target and $ 15.7 billion for the following months. " The monthly average accumulated until February was approximately 3% below the pre-established limit.

2. Reinforce the contraction bias with increases in the price level, in response to continued high inflation. Thus, "the COPOM considers it necessary to adopt new measures aimed at moderating the impact of the short-term inflationary dynamics on the expectations" of increasing consumer prices.

3. Keep until May, inclusive, the excess compliance registered in February. "The WB's target for March-May is reduced by $ 43 billion to neutralize half of the $ 80 billion seasonal increase last December. The other half (excluding the expansion of foreign currency purchases) significantly lower than the average current increase observed in this period, equivalent to US $ 70 billion. "

4. To reinforce its caution regarding monetary expansion resulting from possible foreign exchange interventions to be held in March, if the exchange rate is outside the non-intervention zone:

a) "If the exchange rate falls below the zone of non-intervention, the goal of the monetary base will increase with purchases of dollars made through bids from the BCRA. These offers will be up to $ 50 million a day and a cumulative maximum equal to 2% of the March target ($ 1.344 billion)"

(b) "If the exchange rate were above the non-intervention zone, the target of the monetary base will be reduced by the sales of dollars made through bids from the BCRA. To maximize the impact on liquidity, such proposals will be up to $ 150 million per day, the maximum provided in the monetary scheme.

Control of price increases, more than the dollar and rates

"The main mission of the BCRA is to reduce inflation, which remains very high", notes the COPOM statement after the classic meeting at the end of the month. And consider; "Rigorous control of monetary aggregates will lead to this goal, perseverance and monetary discipline are essential to reduce inflation, and the Copom is prepared to maintain this contractionary bias for as long as it takes."

It has been empirically proven that the effects of the monetary aggregate control policy on the reduction of the inflation rate are manifested in a minimum period of 8 months up to 2 years. Hence the decision to strengthen the criteria to achieve this goal, although it is known that much of the acceleration of the price increase of the last months has its origin in the impact of the leap in the exchange rate between April and September. 2018; plus the impact of relative price adjustment, as it is called the increase in utility tariffs announced at the end of last December.

However, in the market there are many analysts and, in particular, operators with securities and dollars, who consider that in the Central Bank they focus more on the control of interest rates, so as not to affect the economic activity, and also in the price of the dollar, because of its effect on inflation, than on the control of monetary aggregates. The decision of the COPOM seems to be intended to demonstrate again the contrary.

In addition, because the zone of non-intervention in the foreign exchange market is not fixed, but remains with an upward shift at a rate of 2% per month. March starts with a floor and ceiling of $ 38,642 and $ 50,007, and ends at $ 39,389 and $ 50,974, as reference values ​​for the wholesale market, which is where companies related to foreign trade and financial entities operate.

The resolutions mentioned in this press release were approved with the unanimous approval of the COPOM members that comprise the president of the Central Bank, Guido Sandleris; the vice president Gustavo Cañonero; the second vice-president, Veronica Rappoport; Enrique Szewach, director appointed by the Board of the Central Bank, and Mauro AlessandroDeputy General Manager of Economic Research.


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